The Transparent RRSP: Summer Reading

The Week of July 17

I took no action for the RRSP.

Instead, all week I’ve been stewing and brewing over something I wrote two weeks ago:

This week, I was actually considering buying shares of APH.TO for the RRSP, but it’s not quite ready yet. I know this one is capable of developing really good patterns. Once I see the trading range tighten, the selling volume lessen, and a pattern improvement on the daily and weekly charts, then I’ll pick the price I’d like to enter at and I’ll put in an order. I’ll give it another couple of weeks. If it ends up going up while I’m waiting for these things to align, I won’t be too concerned if I miss the run. It will either set up again later or I’ll find something else.

So, APH had a major breakout three trading days after that post. The setup I was identifying actually happened – just a lot sooner. I took my eye off the ball. So, I went with my next play. Last week, I bought ECN at $4.03 with a strong feeling that it was going to take out a previous lowof $3.87, which it did only three trading days after I put in my limit order.

Price charts for APH.TO and ECN.TO on freestockcharts.com

I was right both times. The problem is, I’m left frustrated, mainly because I missed the stock that had the bigger move. You know what’s worse than losing money for most traders?

Exiting a stock too soon and leaving money on the table;

Missing out on something you knew was going to happen;

Overcompensating for either of the above two reasons.

I actually shouldn’t be frustrated. Let’s say I never noticed APH at all. I would take that ECN trade any day and I’d be okay with it.

Trading Psychology

Trading psychology is actually a ‘thing.’ I once had a trading coach – an infinitely kind, generous, patient, uber positive day trader based out of Colorado. He was really into trading psychology and he consistently banged the drum on the importance of visualization, meditation, and forming a strong belief system supported by mindful practice. He got me reading Psycho Cybernetics and books by Tony Robbins, among many other things. This reading took me down a path of self-exploration deeper than any other self-improving attempt I’d made in the past. This was when trading had changed me.

I learned that most of what drives our decisions is conscious, but so much of what drives our actual actions is subconscious. A common action for traders is to right a wrong. When we lose, we become prone to overtrading or overcompensating for something we should’ve done instead. We try to make back what we lost or make what we should’ve made on something we ‘knew’ would work. The reality is, there is no certainty in markets and everybody knows this. Nor is there total certainty about anything in life.

I finished reading Market Wizards, agreat book featuring interviews with top traders in the U.S. These traders all had their own unique strategies, their special recipes for success. What they had in common, however, led to their success: tested strategies, experience, persistence, the need to manage their losses, and learning to deal with the uncertainties of the market.

In this book was also an interview with Dr. Van K.Tharp, a psychologist who focuses on the psychology of trading. It was so fascinating to read about how this psychologist understands the thought process behind trading and has dedicated his work to helping traders get past mental and emotional road blocks in order to achieve their goals for success. Of course, I ordered one of his books from Amazon. I’ll be reading Super Trader – Make Consistent Profits in Good and Bad Markets over the next few weeks as I also read Edwin Lefevre’s Reminiscences of a Stock Operator.

Am I upset about missing the move on APH? 150% yes. Have I missed other amazing opportunities in the past? Yes, hundreds of times. Has that ever stopped me from making other decisions with good payoff? No. Will I miss other great opportunities in the future? Of course. Will I take other great opportunities in the future? You betcha.

The market will always be there. Opportunities will always present themselves. I will try to be ready for them, but I can’t catch them all. Learning and growing from these experiences is part of the fun and adventure of trading. I know I’ll get over this missed trade with APH. I hope that things work out with ECN and that I’ll have another few opportunities to buy more shares of it. One day, APH will present yet another opportunity and I will do my best to be ready.

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